Steps for Heirs to Repay Reverse Mortgage After Death

If you are the heir to a borrower who has a reverse mortgage who has passed, here are the steps we recommend you follow:

Time to Payoff Reverse Mortgage

Generally you will have up to 6 months to refinance the reverse mortgage into a loan of your own, or up to 12 months to sell. (Each 3 months requires an extension by the loan servicer.)

Step 1.

Locate the last reverse mortgage statement. We have guidance here for how you can read the statement, so you know what you are dealing with.

Step 2.

Contact an elder real estate specialist in your area. You may not even want to sell the home for sure, but it is best to know how much the home would most likely bring in a sale. This type of specialist can also help you with estate sale information if you need it.

Step 3. (Can be working on at the same time as one and two)

Perfect your title to the property. The home may need to go through probate to sell or transfer title to you, to a relative, or to a third party. Contact an estate attorney to determine the best and fastest way to accomplish this (if the borrower had an attorney that would be a great place to start).

The attorney can advise you of any potential delays or liabilities for transferring title, but you can’t transfer title to anyone else in a sale or otherwise if it is still in the original owner’s name.

Step 4.

Decide if you want to keep the home, give it to a family member, sell it or walk away and let the lender take it back. If you decide you want to keep the home, you will need to pay off the balance of the mortgage or 95% of the current market value if the balance is more than the home is worth. If you decide to sell the home or give it to another family member, having the elder real estate agent ready to go and title in your name will get you going in the right direction.

Step 5.

Talk to your reverse mortgage lender. Once you have all your decisions made and are ready to act, if the lender has not contacted you already, you are ready to contact the lender to tell them your plans. The lender will probably have found out about the passing already. They may have contacted you to let you know the loan is due and payable, but they may not have your information.

If you know what you want to do and can contact them with your plans in place before they even notify you (their contact info will be on the statement), then your plans will not be delayed by them not being ready to act when you are ready to sell or refinance the loan. They have things they must do on their end including appraisals, contacting HUD, etc. and if you are ready to proceed, you can eliminate unnecessary delays.

Step 6.

If all plans point to the fact that the property is not worth enough to sell and you do not want to keep it, get ready to walk away. Be sure to have all your loved one’s belongings removed from the property that you wish to keep. Then the senior real estate professional you consulted in the beginning can probably connect you with an estate sale professional in the home.

These individuals will conduct a sale of all the personal items you did not remove and then donate all remaining items at the end of the sale. Many times, this can help pay some final expenses as well as provide some tax benefits with donations. Be sure to talk to your tax specialist to determine what receipts, etc. you will need to file the final tax returns.

Also See:

Ask ARLO™ / Heirs and Maturity

2 Comments on “Steps for Heirs to Repay Reverse Mortgage After Death”

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ARLO™November 12, 2018
Jeannettea K.November 12, 2018
My mother passed two months ago. I was added to speak when she was alive. I was her caregiver and on SSDI in which she required care 24 hours a day. Before signing for the Reverse Mortgage she specifically asked what happens to me and because I am 65 they said it would pass on to me. But I received a letter asking my intentions. What really happens next? After her death I paid out of pocket over $1200 to catch up her taxes and currently this is home for me.
- ARLO™November 12, 2018
  Michael G. BransonNovember 12, 2018
  Hello Jeannettea,
  The loan never just passes on to someone else after the borrower permanently leaves the property, whether because of death or because they move to an assisted living facility. When you were added as a person eligible to speak on behalf of your mom about the loan, that just means that you have authorization the lender needs to discuss the loan with someone other than the borrower.
  Because of financial privacy laws, reverse mortgage lenders cannot divulge personal information or discuss a loan with a third party, even a son or daughter, without consent of the borrower or a court order. You have that consent but that does not help you about the loan now.
  The loan is now due and payable with mom no longer living in the property. Under the terms of the reverse mortgage, as the heir. You can sell the home, refinance the loan with a new loan in your name or pay off the loan with other funds available to you. If the amount owed on the reverse mortgage is more than the current value of the home, you can pay off the balance for 95% of the current value instead of the full amount owed. If you do not wish to refinance or sell the home, you also have the right to walk away from the property and owe nothing, regardless of how much is owed and what the value is.
  My suggestion is to first decide what you want to do and what you can do. If you want to keep the home but don't feel as though you could get a new loan to refinance the balance of the reverse mortgage, you need to find out how much equity is in the home (if any) and take steps to protect that equity. Contact a real estate professional in your area and determine the most probable selling price of the property.
  Compare that to your mom's most recent statement to determine whether there is equity in the home. You need to make sure the property title is in your name if you intend to sell it. If you are not on title, you cannot sell the home or get a new loan on it so as soon as you determine that there is enough equity to get a new loan or to sell, you need to work quickly to obtain title to the property.
  If you are getting a new loan, then you would show the lender that you have taken those steps and they should be willing to work with you to complete your financing. If you are selling the home, again, once they see that you have taken the steps to clear the title and have listed the home for sale, they will work with you to allow you to complete the sale and can give you extensions as necessary.
  The one thing you don't want to do is just wait until they decide you are not making any efforts to repay the obligation and place the property into foreclosure. The more proactive you are, the better your chances of retaining some equity in the home.

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Steps for Heirs to Repay Reverse Mortgage After Death

Time to Payoff Reverse Mortgage

Step 1.

Step 2.

Step 3. (Can be working on at the same time as one and two)

Step 4.

Step 5.

Step 6.

About the Author
Michael G. Branson

2 Comments on “Steps for Heirs to Repay Reverse Mortgage After Death”

Leave a Reply

Time to Payoff Reverse Mortgage

Step 1.

Step 2.

Step 3. (Can be working on at the same time as one and two)

Step 4.

Step 5.

Step 6.

About the Author Michael G. Branson

2 Comments on “Steps for Heirs to Repay Reverse Mortgage After Death”

Leave a Reply

About the Author
Michael G. Branson